Oil prices fell rapidly as…
Oil prices fell this week…
The Energy Information Agency (EIA) projected today that crude oil production in the U.S. Gulf of Mexico should increase to record high levels next year, adding more woes to the ongoing global supply glut.
On average, for this year the U.S. Gulf of Mexico will produce 1.63 million barrels per day, which will rise to 1.79 million barrels per day next year. Ultimately, by December, the EIA estimates that the area will be production 1.91 million bpd.
In 2017, the Gulf of Mexico will likely account for 21 percent of total U.S. crude oil production, up from 18% of total production for this year.
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The EIA noted that “production in the GOM is less sensitive than onshore production in the Lower 48 states to short-term price movements. However, decreasing profit margins and reduced expectations for a quick oil price recovery have prompted many GOM operators to pull back on future deepwater exploration spending, reduce their active rig fleet by scrapping and stacking older rigs, and restructure or delay drilling rig contracts.”
There are a total of 14 projects that will contribute to the Gulf of Mexico projections, including two projects that are not expected to start producing until next year, while four of those projects will be coming online this year, barring any developmental delays.
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Eight projects were launched in the Gulf of Mexico last year, including three run by Shell, two by Texas-based Noble Energy, and one each by ExxonMobil, Anadarko, and LLOG Exploration. Shell, Noble and Anadarko also each have projects slated to launch this year.
In a note to clients published by Business Insider earlier this month, RBC Capital Markets’ Michael Tran commented on Gulf of Mexico production in light of the current oil price crisis, saying: "The major and often overlooked reason behind the buoyant nature of U.S. production, particularly in the back half of last year, stems from offshore fields in the Gulf of Mexico (GoM) that have offset slowing onshore growth," RBC Capital Markets' Michael Tran wrote in a recent note to clients.
"The bottom line is that US production would have fallen much more quickly had it not been for growth in the Gulf of Mexico," Tran added.
By Charles Kennedy of Oilprice.com
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Charles is a writer for Oilprice.com